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January 6 2020

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88 The Journal of Commerce | Januar y 6 2020 Surface Transportation 2020 ANNUAL REVIEW & OUTLOOK tonnage per day dropped 4.6 percent, while shipments declined 3.9 per- cent. LTL shipments per day dropped 7.7 percent from a year earlier at UPS Freight. "Even though our retail business has expanded, the majority of our business still has exposure to the industrial economy, and it still is muted," Darren Hawkins, CEO of YRC Worldwide, told The Journal of Commerce. "The Midwest Rustbelt was the toughest part of the freight economy we saw across the nation," he said. Labor disruption at General Motors "made that even more acute." Building density Throughout 2019, large LTL carri- ers doubled down on efforts to build freight density, improve networks, LESS-THAN-TRUCKLOAD (LTL) carriers took a different route through 2019 than their truckload counterparts, managing to maintain pricing disci- pline and focusing on their bottom lines, and even adding capacity where they could build density. Which road they take in 2020 depends in part on the US manufacturing industry, which still provides a large share of LTL freight. A manufacturing slowdown in 2019 hit LTL trucking companies harder than full truckload carriers, and it likely sped a move to diversify further into retail business, especially e-commerce freight. "Some custom - ers simply have fewer shipments than normal," Greg C. Gantt, CEO of Old Dominion Freight Line (ODFL), said during a third-quarter earnings call in late October. Tonnage at the second-largest US LTL company fell 4.4 percent year over year in the first nine months of 2019, and LTL shipments fell 1.6 per- cent, an indication of not only fewer but lighter shipments. In the third quarter, ODFL's tonnage per day was down 5.2 percent, shipments per day 4.5 percent, and intercity LTL miles 4.6 percent, pulling down revenue nearly 1 percent year over year. "In terms of the balance of our business, 55 to 60 percent of our revenue is industrial, and close to 30 percent is retail," Adam Satter- field, ODFL's chief financial officer said during the call. "And so this year, we have definitely felt, as the indus- trial economy has been slowing, that that's had an impact on our industrial customers" and on ODFL's volume. ODFL isn't alone. Many other large LTL carriers reported declining tonnage and shipments in the third quarter. At YRC Freight, tons per day dropped 4 percent and shipments fell 3.5 percent. At ABF Freight System, and bolster profits. ODFL continued to expand its network, as did many other carriers. Estes Express diversi- fied services through acquisition and the application of new technology. Saia added several terminals in the Northeast. "In LTL, we rolled out game- changing tools that use machine learning to reduce our $1.3 billion annual linehaul spend, our $650 mil- lion spend for pickup and delivery, and also … the $365 million we spend annually in dock operations," Brad Ja- cobs, CEO of XPO Logistics, said in an Oct. 28 earnings call. "Our adjusted OR (operating ratio) was our best ever for the third quarter [80.8 percent]." And while two regional carriers closed their doors, others expanded, turning the prevailing gloomy Branching out US LTL sector pursues density in Amazon era By William B. Cassidy -6% -4% -2% 0% 2% 4% 6% 8% 10% 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4* 2020 Q1* 2020 Q2* US LTL rate growth expected to slow in 2020 Source: IHS Markit © 2019 IHS Markit Year-over-year change in IHS Markit US less-than-truckload (LTL) producer price index Notes: *IHS Markit predictions

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